United States Targets Tighter Rules of Origin Under USMCA

The United States is eyeing tighter rules of origin for non-automotive manufactured goods under the USMCA, aiming to ensure that trade benefits flow primarily within North America. USTR Chief Jamieson Greer highlighted the issue as a key focus in the upcoming review of the agreement, noting that strengthened rules could further boost regional sourcing, reduce reliance on imports from countries like China, and enhance the economic security of the United States, Mexico, and Canada.

In its report to Congress on the USMCA review, Greer highlighted this issue as the first in a series of potential adjustments affecting Mexico and Canada. “Strengthening rules of origin for industrial goods is necessary to ensure that the benefits of trade in these products flow substantially to the Parties,” Greer stated.

Between January and November 2025, Mexico’s non-automotive exports reached US$383.1 billion, accounting for 63.3% of Mexico’s total merchandise exports and reflecting a 16.7% increase compared with the same period in the previous year, according to Banxico.

Strengthened rules of origin were a key change introduced under the first Trump administration when the USMCA replaced NAFTA in July 2020. Tighter rules increase the use of North American inputs, parts, and components in goods traded within the region with reduced or zero tariffs, limiting sourcing from other regions. For instance, the USMCA currently sets a Regional Value Content (RVC) of 60% for flat-screen TVs, 40% for TV parts, and 50% for electrical appliances. 

Jason Marczak, Vice President and Senior Director, Adrienne Arsht Latin America Center (Atlantic Council), noted that US imports from China have significantly declined in several sectors in recent years, including machinery, medical equipment, metals, plastics, and rubber. “Overall, imports from China have dropped nearly 8%, while imports from our North American partners have increased,” Marczak said.

Marczak emphasized that further progress could come from modernizing and harmonizing customs procedures, potentially standardizing certificates of origin across the three countries to reduce ambiguity and confusion about product origin. “Improving rules of origin will be essential to strengthen industries in the United States, Mexico, and Canada, particularly for critical products like electronics and other goods vital to US economic security, both domestically and globally,” he added.

Analysts at Banco Base noted that the growth in Mexico’s non-automotive exports reflects US tariffs under the International Emergency Economic Powers Act (IEEPA) not being strictly applied, while Mexico’s compliance with USMCA remains high. Conversely, sector-specific tariffs on the automotive industry are being enforced, contributing to a 4.6% contraction in Mexico’s automotive exports over the first 11 months of 2025.

USTR Evaluates USMCA Ahead of 2026 Review

Greer previously noted that beyond the rules of origin for non-automotive manufactured goods under the USMCA, several other issues persist. In Mexico, labor law enforcement remains inconsistent, customs operations face budgetary shortfalls, and recent energy sector reforms have negatively impacted US investors. In Canada, measures such as the Online Transmission Act limit access for US technology and media companies and constrain dairy trade. Additional challenges include structural trade imbalances, offshoring, and increased investment from non-market economies.

Greer emphasized that while some measures, such as Section 232 automobile actions, have addressed deficiencies, further steps are needed to strengthen domestic manufacturing, create quality jobs, and ensure USMCA meets its intended goals.

The 2026 USMCA review, scheduled for July 1, 2026, will determine whether the agreement is extended to 2042, maintained with annual reviews, or allowed to expire in 2036.